Canadian Dollar Rallies on a 0.6% GDP Revision for Q1, Q2 of 2013

by
Benjamin Spier, Technical Strategist

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The Canadian Dollar rallied thirty pips against the Japanese Yen, as Statistics Canada revised economic growth 0.6% higher (annualized) in each of the first two quarters of 2013.

Quarterly gross domestic product rose 2.9% (annualized) in the fourth quarter of 2014, significantly beating expectations for 2.6% growth and up from 2.7% growth in Q3. Economic growth in Q4 was also well above the Bank of Canada’s prediction for 2.5% growth. GDP declined 0.5% in December on a monthly basis, disappointing expectations for only a 0.3% decline.

Besides for reporting the growth numbers for Q4 and December, Statistics Canada also raised its annualized GDP for Q1 of 2013 to 2.9% from a previous estimate of 2.3% and GDP for Q2 to 2.2% from 1.6%. The surprise revision was due to data from farm crops and energy exports. The Bank of Canada said in January that the direction of the next target interest rate move depends on data flow. Therefore, significant upward revisions in economic expansion may improve the central bank’s economic outlook, which is why the Canadian Dollar rallied on the release.

CAD/JPY rallied to test 92.00 following the GDP announcement, and the pair may next find resistance by a weekly high at 92.78. The Canadian Dollar initially dipped on the disappointing monthly GDP for December, but then rose higher as the markets digested the quarterly revisions in 2013.